Despite Revenue Miss, Analyst Prefers Home Depot Over Lowe’s

Although Home Depot’s revenue missed estimates as warm winter weather led customers to shift their purchases earlier, one analyst still prefers the company over its competitor Lowe’s Cos.

“Home Depothas made big improvements in merchandising and distribution,” said Laura Champine, managing director at Canaccord Genuity Securities. “I can’t say the same thing for Lowe’s . I think Lowe’s is playing catch-up. We don’t expect Lowe’s to have same-store sales up as much as Home Depot .”

Champine told CNBC’s “Squawk Box” that people had expected Home Depot, which has risen 31 percent from a year ago, to post bigger upside in the quarter and stronger full-year guidance.

Sales at Home Depot rose 5.9 percent to about $17.81 billion in the first quarter, which fell short of analysts’ average estimate of $17.96 billion.

“The revenues were up 6 percent,” she said. “We were looking for 5 (percent) officially, but with perfect weather, you would expect more than this.”

The company said it expects sales to pick up later in the year. It forecast fiscal-year sales rising about 4.6 percent, up from its prior outlook calling for a 4 percent increase. Home Depot raised its profit outlook for the year to $2.90 a share from $2.79 a share.

Champine added that she thinks the stock is closer to the bottom of its cycle than to the top.

“Our price target is $45, and I think that’s likely near term just as people got too excited about home-related spending improving,” she said. “This is a little underwhelming.”